Why Did Jamie Dimon Lie to Congress About JP Morgan’s Bailouts?
--by M.F. Quintilianus
If I said it once, I said it a thousand times: Mendacem oportet esse memoram. For people like Jamie Dimon who thought they were cool sleeping through their Latin classes, it means: A liar must be good at remembering.
Jamie Dimon blacked out during that lesson, and when he got flustered before Congress during the London Whale hearings, he forgot his earlier lies. As we shall see, flustered witnesses are menaces to the party line since they’ll cough up all sorts of crazy shit. And that’s exactly what the head of JP Morgan did.
Dimon’s temper tantrum in the Senate—the product of arrogance that he wore literally on his sleeve—produced a spasm of lies so astounding that I found myself wondering if the Casino Emperor is demented.
Dimon’s performance has been widely discussed. The most interesting comment came, as it often does, from Matt Taibbi, who observed the following about JP Morgan’s CEO, Chairman of the Board, and President:
He particularly kept swallowing the word 'granular,' which repeatedly came out as 'granyer.' The phrase, 'CIO, particularly the synthetic credit portfolio, should have gotten more scrutiny,' came out like CIO partick-ler the synth-por-shoulda more scrooney. I don’t mention this to pick on the guy’s public presentation, but more because it seemed like Dimon’s speech got more manic and incoherent the more he dissembled and covered up.
Aside from establishing Taibbi as the odds-on favorite to win the 2012 Tom Wolfe Phonetic Dialogue Award, that passage encapsulates perfectly how just how sloppy JP Morgan’s Gambler-in-Chief got before the Senate.
The question that made Jamie Dimon unravel like a split-open golf ball came from Jeff Merkley, one of the half-dozen Banking Committee Members who’s not on JP Morgan’s payroll.
At the 1:51:37 mark in the hearing, Dimon went ballistic over the utterly non-controversial premise of Merkley’s question, namely, that JP Morgan had to be bailed out in 2008. Unfortunately, no one on the Senate Banking Committee, even though it called Dimon to testify under oath, bothered to swear in their boss, er, witness. It’s too bad, since Dimon’s answer would have been a textbook case of perjured testimony (bold italics on the lies):
Q. In 2008 and 2009, your company benefited from half a trillion dollars in low-cost federal loans, 25 billion in TARP loans—TARP funds, untold billions indirectly from the bailout of AIG that helped address your massive exposure in repurchase agreements in derivatives. With all of that in mind, wouldn’t JP Morgan have gone done without the massive federal intervention both directly and indirectly in 2008 or 2009?
A. I think you are misinformed. And I think that misinformation is leading to a lot of the problems we are having today. JP Morgan took TARP because we were asked to by the Secretary of the Treasury of the United States of America, with the FDIC in the room, the head of the New York Fed, Tim Geithner, Chairman of the Federal Reserve Ben Bernanke. we did not, at that point, need TARP. We were asked to because we were told, I think correctly so, that if the nine banks there, some may have needed it, take this TARP, and get into all of the banks, and stop the system from going down. we did not borrow from the Federal Reserve except when they asked us to. They said, "please use the facilities, so it makes it easier for all the others"—
Q. Wouldn’t we all—
--and we were not bailed out by AIG. If AIG itself—we would have had a cost of a billion or maybe $2 billion if AIG went down, and we would have been okay.
Let’s take the lies in turn.
1. Dimon’s Assertion That JPM Did Not Need TARP Is False
In previous testimony, Dimon has merely implied that JP Morgan did not need the $25 billion it received in TARP money. Dimon’s claim has always been that Hank Paulson forced JP Morgan to take TARP together with the “other” banks, which were really the ones in need of the dole. The tempting but false inference wafting above Dimon's claim is that JP Morgan did not need the bailout money. And before he was disarmed by Merkley, Dimon had avoided making that express statement like the plague. Dimon’s February 2009 testimony about TARP is representative:
As this Committee is aware, JPMorgan Chase did not seek the government’s investment. But we agreed to support the government’s goal of obtaining the participation of all major banks.
“Not seeking” TARP and “not needing” TARP are two totally different things. One statement is true and the other is false, and Dimon always observed that crucial distinction. Until now, that is.
In front of Senator Merkley, Jamie Dimon—forgetting the earlier script crafted by lawyers—crossed the line and said what he’s wanted everyone to believe all along: JP Morgan did not need the TARP money.
That’s a $25 billion lie, wholly exposed by JP Morgan’s voluntary participation in two other bailout programs at the same time the company was supposedly “forced” to take $25 billion in TARP money on October 28, 2008.
First, just one day before TARP became law, JP Morgan had already elected to dip into the Federal Reserve’s “Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility,” AMLF for short, to the tune of $62 billion.
If JP Morgan really didn’t need the TARP money on October 13, 2008, when Jamie Dimon signed the agreement to take it, why had JP Morgan willingly taken loans well over twice as large from the Federal Reserve—just in AMLF money—just 10 days earlier? The answer is that JP Morgan needed every penny of the $25 billion—and a whole lot more—and that Jamie Dimon is lying when he says differently.
Second, JP Morgan’s need for the $25 billion TARP bailout persisted for at least two weeks after it took the money, when JP Morgan again stuck its massive ladle into the federal alphabet soup of bailout programs and helped itself to another $40 billion in taxpayer-backed funds, this time the FDIC.
As of that date, JP Morgan had borrowed $39.7 billion from the FDIC’s “Temporary Liquidity Guarantee Program,” TLGP for short.
JP Morgan's bailout by the FDIC was completely voluntary. According to the FDIC’s website, Jamie Dimon—had his company not needed an additional $40 billion—could have opted out of that bailout program, either in whole or in part:
Can an entity opt out of just one part of the Temporary Liquidity Guarantee Program?
Yes. An entity can opt out of either the senior unsecured debt guarantee part of the program, the transaction account guarantee part of the program, or both.
Had JP Morgan not needed $25 billion in TARP money, it wouldn’t have taken a single zinc penny from other public coffers. But the facts of record, forgotten (or flouted) by Jamie Dimon, demonstrate that JP Morgan willingly took over $100 billion from other bailout programs at the very same time it was “forced” to take TARP.
2. Dimon’s Assertion That JP Morgan Never Borrowed From The Fed “Except When They Asked Us To” Is False
Once again, Jamie Dimon forgot the script when he told Senator Merkley that JP Morgan only borrowed from the Fed “when they asked us to.” The original script may be found in Dimon’s March 26, 2010 report to JPM shareholders, where he copped only to using the Fed’s Term Auction Facility:
Our company was highly criticized for accepting the TARP capital and for using the FDIC program. After April 1, 2009, even though we were eligible to continue using the FDIC program, we stopped using it. There were many other government programs (with acronyms such as TALF and PPIP) that we believe were beneficial to the capital markets, but that we did not need and chose not to use, so as to avoid the stigma. (We did use the term Auction Facility (TAF), a special government- sponsored depository facility, but this was done at the request of the Federal reserve to help motivate others to use the system.)
In the two years since Dimon made these statements, he evidently forgot that the party line of “borrowing from the Fed only when asked” was limited to TAF. As shown above, JP Morgan had also borrowed $62 billion from the Fed’s AMLF facility, and had done so when Dimon claimed that JPM’s Fed loans were limited to TAF. In fact, JP Morgan borrowed a total of $260 billion from the Federal Reserve between December 2007 and July 2010.
What this means, of course, is that Dimon’s March 2010 report to shareholders is, like his Senate testimony, false, since JP Morgan was borrowing like a crack addict from multiple Fed bailout programs at the time, not just from TAF.
In any event, Dimon’s TAF claim—that JPM took this money only to “motivate others” to do the same—is absurdly false in its own right. When JPMorgan first borrowed from TAF, in the amount of $2 billion on May 22, 2008, the “others” had already been "motivated" into racking up $435 billion in loans since December 2007, as shown in the Fed's own spreadsheet. Dimon's claim that his company's $2 billion loan motivated other companies to take out loans over 200 times bigger, retroactively over the previous six-month period, seems ludicrous until you consider how it happened.
You see, Dimon thought he was pulling a fast one with these ridiculous claims about Federal Reserve lending back in March 2010. That was before the Federal Reserve threw him under the bus, pursuant to a court order, by disclosing to the public details of the Fed's lending to teetering banks like JP Morgan. The timeline says it all.
In March 2010, Dimon was apparently betting against the late Mark Pittman of Bloomberg, whose FOIA lawsuit against the Fed to make it disclose details of its lending facilities, had not yet reached its final stage. Dimon bet on a long shot reversal, by the Supreme Court, of Pittman's FOIA victories in the district court and the 2nd Circuit Court of Appeals. Like the London "hedge," that bet failed spectacularly a year later when the U.S. Supreme Court refused to take up the Fed's case.
When the Fed disgorged tens of thousands of lending documents sought by Pittman, the mortal damage to Dimon's claims about loans from the Federal Reserve, which had been a big secret since 2007, was done.
In the end, of course, nothing will come from any of this. First, as noted above, no one in Congress bothered to administer Dimon an oath before he testified. Swearing in witnesses is for little people like Roger Clemens, a superstar multimillionaire athlete whose multiple perjury prosecutions tell you a lot about the 1%: they're dead serious about making examples out of winners like Mark Cuban and Martha Stewart for all of Main Street to see.
No, the real issue here is why the Casino Emperor freaked out like a branded animal under the gentlest of wheedling about--of all things--bailouts, and in a hearing about some puny bet gone bad. Supposedly it was a $3 billion loss on European debt. We'll see about that.